WASHINGTON -- China needs to lay emphasis on economic structure reform and higher productivity in order to maintain sustainable growth in the long run, says the secretary of the International Monetary Fund (IMF).

After three decades of double-digit growth, China has now realized that structural reform is critical for it to sustain higher-quality growth, Lin Jianhai told Xinhua on Saturday on the sidelines of the IMF-World Bank Annul Meeting.

"The service sector has potential to play a bigger role in boosting growth, as it accounts for 60 percent of a nation's economic output globally, but only 40 percent in China," Lin said.

Faced with an aging society, Lin said, China has come under rising pressure in raising productivity to keep its economy expanding. During 2000-2008, growth in labor productivity contributed 40 percent of the annul growth. After that, its contribution dropped to about 30 percent.

"To boost productivity, China should increase spending on education and research and development and improve institutional governance," he added.

Commenting on the global economic outlook, Lin said high debt, unemployment and lower-than-pre-crisis-level investment are to blame for the current fragile global economic recovery.

The United States is leading in recovery, while Europe as well as Japan are suffering from disappointing domestic demand, which is causing very weak recovery. Emerging markets and developing countries also show signs of slowing down.

According to the IMF, the world's annual potential growth rate was close to 4.5 percent during 2000-2008. It fell to between 3 percent and 3.5 percent in the following five years, and is expected to be even lower during 2014-2018. Emerging economies also see their potential growth rate decline to 4 or 5 percent.

The IMF secretary also stated that accommodating monetary policies have played a crucial role in dealing with the crisis. However, these policies must be accompanied by fiscal policies and structural reform to stimulate the economy to grow. Focus of the structural reform should be on labor market, price institution governance and data availability plus transparency.

Speaking of the IMF's quota reform, Lin stressed that the reform is inevitable as emerging markets and developing countries contributed more than three quarters of economic growth to the world after the financial crisis, with China alone around one third, which should be reflected through the governance reform of the IMF.

Because of pending consent from the United States, which has veto power, the 2010 quota and governance reform is yet to be fruitful. Lin called for public confidence in the reform, and reaffirmed that the U.S. government is also making efforts to get the green light from Congress.

Talking about the emergency reserve fund established by the emerging-market bloc of BRICS, which groups Brazil, Russia, India, China and South Africa, Lin said that the IMF welcomes the new regional funding arrangement.

Collaboration and communication between the IMF and the BRICS institution will be beneficial as both are dedicated to the economic prosperity of its members and the world, he added.

Economic indicators suggest that the Chinese economy will continue to expand at a steady pace, while inflation is expected to stay mild amidst a stable macroeconomic environment, China's central bank governor said at a meeting of the International Monetary Fund (IMF)'s policy-setting committee here on Saturday.

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